Output and new orders both fell for the first time since the end of 2012, while optimism among companies slumped to a seven-year low, according to the flash purchasing managers’ index compiled by financial information firm Markit.
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According to a monthly survey often used as an economic bellwether in advance of official statistics, Britain’s business activity fell in July to its lowest level since April 2009, providing first evidence to the assumption of Brexit’s damaging effect on the country’s economy.
“We expect a 25 basis point rate cut and an initial £50-60bn round of quantitative easing (potentially with an additional amount to follow over coming months) to help offset some of the economic impact of heightened uncertainty”.
The impact of Brexit on the eurozone was much more muted, however, with Markit’s preliminary composite PMI for the 19 nations that share the euro dipping to 52.9 points, which was however an 18-month low. A reading below 50 indicates a contraction.
The British pound was trading lower by more than 1 percent early Friday morning at $1.3096 USA dollars, as the country saw a “dramatic deterioration” in its economy.
The manufacturing PMI reading in the previous month had been 52.1 and for services it had been 52.3.
France’s private-sector economy showed signs of stagnation in July as a continued slump in manufacturing output erased a return to growth in services.
Williamson attributed the downturn “in one way or another to Brexit”.
However, despite both manufacturing and services sectors seeing a decline in output and orders this month, exports picked up, driven by the weakening of the pound.
“At this level, the survey is signalling a 0.4% contraction of the economy in the third quarter”, Williamson said.
The pound fell after the survey was released on Friday.
Shockwaves from the vote did not pass Britain by, however, with a corresponding survey there registering the biggest drop in its 20-year history to suggest the economy is shrinking at its fastest rate since the financial crisis.
“The combination of a weaker pound, increased uncertainty and slower United Kingdom growth is expected to dampen Irish exports, and also weigh on confidence”, said Dr Loretta O’Sullivan, group chief economist.
‘However, with a subdued global economy, it is not yet clear whether these opportunities will materialise in the long term’.
United Kingdom output prices rose during July, although the pace of increase was only mild and weaker than in the prior month.
While manufacturing was hit, new export business rose for the second straight month as a result of the sharp drop in sterling.
‘The readings suggest we are heading for a recession again and it is nearly certain the BoE will pull the trigger on aggressive stimulus to boost aggregate demand. The Bank will throw the kitchen sink at this now’.
Mr. Hammond also said he believed he could still “reset fiscal policy” during Britain’s Autumn Statement, an annual report the Treasury makes to Parliament when economic forecasts are published in the fall.
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Businesses in Ireland fear a shrinking economy in the United Kingdom will have a knock-on effect here.
